Mike Maples Jr. is a co-founding Partner at Floodgate. He has been on the Forbes Midas List eight times in the last decade and was also named a “Rising Star” by FORTUNE and profiled by Harvard Business School for his lifetime contributions to entrepreneurship.
Before becoming a full-time investor, Mike was involved as a founder and operating executive at back-to-back startup IPOs, including Tivoli Systems (IPO TIVS, acquired by IBM) and Motive (IPO MOTV, acquired by Alcatel-Lucent. Some of Mike’s investments include Twitter, Twitch.tv, Clover Health, Okta, Outreach, ngmoco, Chegg, Bazaarvoice, and Demandforce.
In his new book, Pattern Breakers, Mike investigates why some businesses succeed, while others (deemed most likely to succeed) shut their doors despite doing everything right. His research upends conventional wisdom and today’s formulaic approach to entrepreneurship and it is perhaps unsurprising therefore, that Steve Blank (co-creator of the Lean Startup movement) describes this book as, ‘the most important start-up book of the last ten years.’
In this interview, I Speak to Mike Maples Jr, Investor & Author of Pattern Breakers: The Secrets Behind the World’s Most Successful Start-Ups.
Q: What are inflection points?
[Mike Maples Jr]: Yeah, well, I guess I’d like to say that I had some sort of brilliant insight like when the apple hit Isaac Newton. But it was really born of misunderstanding. What I’d noticed was that 80% of our profits had come from what’s called pivots. Twitch had started out as Justin.tv, Twitter began as a podcasting company called Odeo, and Chegg started as a classifieds posting for college kids. All of them became completely different businesses on their way to great success.
So, I thought, okay, am I just a lucky fool here? None of them seemed to follow the framework they were supposed to; it seemed kind of random and wild. I wondered if I should retire before I got exposed or if there was something else to understand here. I got curious about why some startups, which seemed to do all the right things—hire the right people, follow the right frameworks, operate their business well, and define a good culture—fail.
And then there are other companies where, if you could get your money back right after investing, you probably would, but then they go on to great success despite themselves. What’s going on there? The roots of the inflection theory were kind of this lack of understanding of why that was and what we could learn about it.
Q: What is the role of timing in the success of entrepreneurs?
[Mike Maples Jr]: I think it [timing] may be the single most important factor, at least as it relates to the uncertainty of it all. You have to have great founders, you have to execute well, you have to do a bunch of things well. But those are more controllable by having the right people involved, doing the right things. Timing is much harder to control. This was a key insight we gathered as we studied this topic.
Basically, the reason timing matters is that most of the time, startup ideas don’t work. Most of the time, the world stays as it is. The status quo has an advantage; it has a built-in upper hand. For a startup to win, it has to be not merely better than what’s there; it has to propose something radically different, something that never could have existed before, something that can’t be compared to anything that’s happened.
The reason timing matters so much is that every now and then there’s a change event, presenting a window of time where the founder can show up, not by being better but by changing the subject entirely. Without that inflection, without that change event external to the company, the entrepreneur doesn’t have the chance to change the subject.
That’s why timing is so important. When that inflection arrives, there’s a window of time and a new form of empowerment where the entrepreneur can suddenly have the upper hand. Without that inflection, you can have the right idea. My partner Ann and I at Floodgate like to say every startup idea has been tried, all of it will happen. The question is just when it is time for it to happen. That’s where the inflections come from.
Q: Can you talk us through the importance of mentally living in the future?
[Mike Maples Jr]: I’m glad you brought that point up. The first lesson we learned is that you have to harness inflections because that’s how you get the upper hand. Living in the future is where the great ideas come from. Another counterintuitive lesson I learned was that if you want to have a great startup idea, don’t try to think of a startup. If you focus on creating a startup, you’ll be grounding yourself in the present, studying customers living in the present, their problems in the present, and their unmet needs in the present. Even if you identify a problem to solve, you’re solving it within the context of the current rules of the current incumbents, so they’re still defining the market.
What you want to do is not go after a big total available market that’s understood. You want to define a future market by living in the future. There was no market for browsers when Marc Andreessen (co-author of Mosaic, and co-founder of Netscape)_ was at the University of Illinois, but he was in a supercomputer lab with a really fast network, tinkering with new technologies of the internet that had just been made legal for business. Previously, they were only legal for government and universities. So what was Marc doing when he created the browser? He was making the internet immediately more useful for himself.
We found this time and again. The ethernet was invented at Xerox PARC by Bob Metcalfe. If you look at him, he’s like, “Of course, someday there’s going to be computers on every desk. Of course, they’re going to have graphical user interfaces and mice. And of course, they’re going to want to share laser printers.” No computers did that at the time, other than at Xerox PARC, but Bob Metcalfe was living in a time machine, seeing the future before others did.
Suddenly, your intuition about what to build is much more likely to be right because you’re building what’s missing in the future. You’re tinkering with technologies first hand, understanding what’s new about them firsthand, and understanding what’s missing to fulfill and actualize their full potential firsthand. By getting your hands dirty and understanding firsthand what needs to be built, the great startup ideas happen.
[Vikas: Practically, how do we do that?]
[Mike Maples Jr]: I like to say a lot of people suggest that when you want to have good ideas, you should get out of the building and talk to customers. I agree with that, but there’s something you should do even before that: get out of the present. My favourite question when evaluating a startup idea is, “Is this from the future?”
Often, I’ll get pitches, like lately, I’ve been getting a lot on mental health. An entrepreneur will say, “I have an app that helps with mental health. It’s a problem, a crisis that needs to be solved.” I’ll say, “I agree, but why is your idea from the future?” They’ll respond, “Well, in the future, mental health needs to be solved.” I’m not interested in your ideas about the future; I want to understand why you are living in it today. Why are you living in a different future right now than other people are?
Some people are already living in the future. You might be in a supercomputer lab, a genetics research lab, or an AI-leading company like OpenAI, Anthropic, or Mistral in Europe. You might be in one of those places where people are solving unsolved problems that someday everyone will hear about.
Many people say, “Well, that’s easy for you to say, but I’m not in one of those places. Right now, I’m just hanging out in a big company. I want to get into the future. How do I get out of the present if I’m not already out of the present?” One of my favourite examples is Maddie Hall from Living Carbon. She was thinking of startup ideas and then had the insight to apply for a job as Sam Altman’s Chief of Staff at OpenAI. She followed Sam Altman around for a year and a half, and the odds of colliding with the future are extremely high if you do that.
Another example is Todd McKinnon. Before starting Okta, he ran engineering at Salesforce, spending time with every early adopter of cloud computing. He understood their specific needs compared to other customers, and they already trusted him to solve their problems because he already had.
There are many ways of living in the future or catapulting yourself into it, but the first order of business is to get out of the present. William Gibson was right when he said, “The future is already here, it’s just not evenly distributed.”
Q: Why (and how) do we stress test our ideas?
[Mike Maples Jr]: So, the idea of the stress test came about because of how hard it is to know whether a startup idea will work. Initially, you only know your idea is non-consensus; a lot of people think it’s dumb. You find out later if you’re right by testing it in the real world.
In my practice, I noticed that some ideas sound terrible but are worth pursuing. Justin.tv sounded like a terrible idea, but it was a good opportunity because there were some underlying inflections. Justin had insights about being an influencer in the future, user-generated content, and being internet famous. Just because the initial idea was wrong, or its implementation was wrong, didn’t mean the insight was wrong or that the inflections weren’t powerful. So, that was an idea that sounded dumb but needed to be protected.
Many great startup ideas fall into the “sounds like a bad idea, is a good idea” category. In fact, most of them do. On the other end of the spectrum, you have ideas that sound good to most people. For example, Fanbase, a social network for sports fans. When described, almost everyone said it sounded like a good idea: social networking is big, sports are big. What’s not to like? The problem was, there was nobody desperate for a social network for sports fans, so it failed. These are the most dangerous ideas—the ones that sound plausibly good but aren’t.
A stress test lets you evaluate an idea without jumping to conclusions. You ask a set of penetrating questions: Does this idea embody certain empowerment conditions in the inflections? Does it have a non-consensus and correct opinion behind it? Does it come from the future? Is it matched to a future not everyone is experiencing but we feel is valid?
This approach provides a mechanism to evaluate the idea objectively, detaching yourself from the emotion of being right or wrong and from the input you’re getting. You want an objective standard for assessing the idea
Q: What about those first investors and customers?
[Mike Maples Jr]: …it’s interesting because I find that customers often embrace startup products for reasons different from what most people realize. Most people think customers buy products because of their utility value, and while that’s true for most products, it’s not the case for startups. People buy products from startups because they believe in what the founders believe. They’re tinkering with the same technologies the founders are, and they see the empowering opportunities to break patterns just like the founders do. Suddenly, they understand there’s a different future to move towards.
Early customers are animated by belief, not utility. They buy for aesthetic reasons, not practical ones. There’s an aesthetically superior future they co-create with the founders. Therefore, you only want to talk to people who are primed to move to that different future with you. Most people won’t like your idea if it’s radical enough, so you want to find a tiny subset of people prepared to like it and energize them first, rather than wasting your time on those who aren’t ready to move yet.
I think storytelling is really important. We’ve had stories long before the written word because they work. They transmit through generations. A good story triggers involuntary reflexes—it’ll cause you to sweat, smile, or feel certain emotions. You want to make everyone you persuade a hero in their own hero’s journey. The founder isn’t the hero; the founder is the mentor.
Like Luke on Tatooine, the hero, and the founder is like Obi-Wan, teaching Luke the Force and how to use the lightsabre. As the founder, you engage your early customers, employees, press, partners, and investors in a call to adventure, where each of them is a hero in their own journey. You help them understand why working with you and joining your movement will help them achieve a transformation in their own life by moving to an aesthetically better future.
Q: How can the corporate sector apply the principles of inflection points?
[Mike Maples Jr]: …the most successful companies often find it hardest to pursue these pattern-breaking ideas. When you think about it, a corporation operates under a different type of capitalism than a startup. Corporations aim to consistently compound value, create, and extend their advantages over decades. This involves following a pattern consistently.
However, breaking that pattern to enter entirely new leading markets is very challenging. As you point out, it’s not that corporations lack the capabilities, but they have a different risk profile. Executives think of risk as the probability of not succeeding, rather than the expected value of the upside if they do succeed. This reflects a fundamentally different worldview of what success is.
Corporations need to decide if they want to grow by continuing to follow the established pattern or by adding pattern-breaking products to their portfolio. If they choose the latter, they have a fundamental choice: pursue it organically, like Lockheed did with Skunk Works in the 1940s, or IBM with the original PC, or Apple with the original iPhone; pursue it through M&A, like Facebook acquiring Oculus; or pursue it through partnerships, like IBM partnering with Intel and Microsoft.
In all cases, corporations must think differently about risk and how visible to make the project within the company. For example, Lockheed’s Skunk Works operated in a remote location and isolated its team from the rest of the company to avoid too much visibility too soon. This approach helps manage the risk profile of the project.
Q: When is the right time to fail out of a project?
[Mike Maples Jr]: …my view of failure can be controversial to some. To me, the only way a founder fails in a startup is by losing their time. A lot of startup founders, three years in, realize their startup isn’t working as they thought it would. They feel stuck, slogging through out of obligation rather than passion because they have employees, investors, and commitments. They feel tied to the business they’ve started.
I tell founders to pick ideas by stress testing them for massive asymmetric upside and a lot of risk. Essentially, we’re pursuing a future that’s underpriced. Most people focus on the risk and not the upside; we should figure out as quickly as possible if we’re correct about that future. If we are, we should go all in, leveraging our first mover advantage and our valid understanding of a breakthrough idea. But if we discover in 9 months to a year that we were non-consensus and wrong about the future, we get our time back.
Your willingness to fail allows you to succeed massively. I like to say only people willing to be radically different can make a radical difference. You’ve got to be willing to experience failure. Therefore, you want to make the cost of failure low. Make bets that are small enough that failure doesn’t hurt you badly but aim them on a trajectory where, if you are right, you’re spectacularly right. As an entrepreneur, you only have to be right once if you go after big enough opportunities.
Q: What is the most important thing you hope people take-away from the concept of pattern breaking or inflection points?
[Mike Maples Jr]: I think fundamentally in life you decide how to show up in the world by either choosing to be different or by trying to be better. Most people go with the flow, striving to be better by conventional rules defined by others. However, to make a radical difference and to change things, you have to be willing to depart from the consensus.
There’s a book I like, “Jonathan Livingston, Seagull,” where a seagull wants to fly really fast, but the other seagulls say that’s not what they do—they fly slow and eat scraps off the ocean surface. They end up banishing him from the flock because he’s too out there. He does achieve perfect flight, though. To me, Jonathan Livingston Seagull is a metaphor for life. Our lives are limited, and every day is a gift.
One of the core lessons of the book is how you want to honour the gift of your time. Do you want to honour it by succeeding according to someone else’s rules and thinking, or do you occasionally want to turn inward, think for yourself, and be willing to defy the consensus because you see something the rest of the world doesn’t? Will you move the rest of the world to a future of your design?
That’s the main takeaway I hope people experience: the power of honouring the gift of your time by being willing to make a difference and not just buying into the rules that someone else made for you.